460.509/9–2651: Telegram
The Ambassador in Indonesia (Cochran) to the Secretary of State
priority
471. Ref Deptels 361, 353,1 336 and 335.2 Dept correct assuming (Deptel 353) one year Indo trade agreement with Czech Govt is general type providing reciprocal assurances each govt will not obstruct and will endeavor facilitate export and import of listed commodities in quantities mentioned in agreement.
Indo negotiator Asmaun3 unwilling reveal to Emb anything about pending new agreement except it not yet signed. Neth Commercial Counselor Cator4 understands proposed agreement will provide for vital trade between two countries in about Neth guilders 50 million per year, roughly Neth guilders 25 million each way, although possibly [Page 706] higher level Indo exports than imports. Some question as to method financing, Indos appearing committee to utilize clearing account in Neth, Czechs apparently preferring deal at banking connection, although not known in what currency—sterling, dollars or Swiss francs—settlement would be made. Cator also states Czechs have asked for 1500 tons tin, Indos initially offered 250 tons, possible compromise of 400 tons may be evolved. Rubber commitment, if any, not known. In general level of trade [garbled group] proposed new agreement is roughly same as under one-year agreement expired Aug 1, 1951. Under latter Indos issued import licenses for Czech goods [garbled group] at about rupiahs 24 million through July this year. Particulars about goods for which licenses issued available and can be translated and submitted to Dept if latter so instructs. Data regarding level Indo exports to Czechs under expired agreement not, however, available. Only source left info this type available Emb is visible trade statistics and these not always satisfactory since many exports are listed as shipped to Neth “further destination unknown.” Dept may have access to published Czech import statistics.
I share Dept’s unhappiness over shipment Indo strategic materials to Soviet bloc and at appropriate moment might point out to FonOff: (1) That US in granting Indo exception to Kem Amendment gave evidence its appreciation Indo adherence to UN embargo, (2) that US continues, however, be concerned over Indo trade with Eur Sov satellites, which while relatively small in terms Indo total trade represents substantial gain to satellites, (3) that US, while not completely informed of content Indo-Soviet satellite trade, is of opinion that trade is more valuable to satellites than to Indo, especially since many exports from satellites obtainable [garbled group] Japan and elsewhere, (4) that US wishes emphasize importance it attributes to termination Indo exports of strategic commodities to Eur satellites, and (5) that Indo statement regarding its intent with respect such trade is required under terms new or contemplated US legislation and may weigh heavily in deciding whether US able justify continuing embargo financial aid to Indo.
I do not, however, believe useful purpose can be served by divulging substance of above to Indos at this time, which Dept recognizes as not propitious. I prefer await passage Battle bill or relate new legislation, which wld provide convenient hook on which to hang above argument. I would wish avoid appearance US inconsistency in bringing up above subject immediately after Indo granted exception to Kem Amendment by US which at time exception granted was aware of existence trade agreements with Soviet satellites. I finally wish postpone [Page 707] approach until results Jap treaty discussions and possible repercussions Ceylonese rubber shipments are crystallized.
I do not believe US warranted in making Czech trade agreement final point its eventual appeal to Indos. Indos have already concluded new trade agreements with Hungary and Poland, former effective June 1951 through May 1952, latter July 1951 through June 1952. Indo export contingents these agreements unknown, but Indo import contingents Hungary valued about rupiahs 8.7 million, [garbled group] rupiahs 12.7 million. I believe approach Indo shld be based all trade agreements with Eur Soviet satellites, that singling out Czech agreement illogical and tends introduce polit issue, obscuring basic and generalized econ warfare motivation for US action.
Regret announcement Indo exception under Kem Amendment came when it did. If we are not willing use full force our public legislation to oblige Indo refrain from shipping strategic materials to Soviet bloc, I feel I shld not fall back on secret oral undertaking made in exceptional circumstances on his own responsibility by Hatta as PriMin and Acting FonMin. This undertaking was requested to enable US deliver Indo civil constabulary equipment which US anxious get into Indo hands and which police have used and are using effectively against Commie and other dissident group. Now to reveal Hatta’s commitment wld risk serious damage to his standing, just at time he is working diligently along lines desired by US and is most likely to be next PriMin if Sukiman shld fall as result his favoring US on Jap treaty or for other reason.
It is additionally unfortunate that press stories came out during Subardjo’s visit US that ECA might consider credit to Indo, reported as 50 million dollars in some accounts and 150 million in other.
Indo press has tended interpret US softening on Kem Amendment and handing out prospective new loan to Indo as price for Subardjo’s signing Jap Peace Treaty5 and does not approve such “prostitution”. I am strongly of opinion, and believe Ex-Im Bank representatives who recently visited Indo wld agree with me, that Indo needs no additional new US credit or grant, either 50 or 150 million dollars, at this time. Furthermore I reaffirming my belief expressed throughout our negots on UN embargo and set forth whenever my opinion was solicited on Kem Amendment (particularly Embtel 776) that our policy with Indos on their export trade with Sov bloc will more likely command respect and achieve successful results if severe rather than weak or even compromising.